LGB Properties mulls international lifestyle mixed development on BAT land

LGB Properties (M) Sdn Bhd, a subsidiary of LGB Group, is planning a mixed-use development on a parcel in Virginia Park, Section 13 here that is currently occupied by British American Tobacco (M) Bhd’s (BAT) factory, said LGB Group director Lim Chin Sean.

“We do have some plans in mind, but we have a lot of time to plan for the land as there is a one-year tenancy agreement with BAT. We are still working on our plans and more details will be disclosed after the transaction is done,” he told TheEdgeProperty.com in a phone interview.

He said the transaction might take about three months to complete, subject to BAT shareholders' approval.

“It could be an international lifestyle mixed-use development which will attract local and international buyers as the group also has exposure on the international market,” Lim added.

The purchaser of BAT’s properties is a unit of LGB Realty Sdn Bhd, which is part of the LGB Group. Ultimate parent company, LGB Holdings Sdn Bhd, held a 49.89% indirect stake in waste treatment and management company Taliworks Corp Bhd and 25.16% in steel pipe manufacturer Amalgamated Industrial Steel Bhd.

LGB Group, through its subsidiary Bellworth Developments Sdn Bhd, has a number of property developments locally – such as the completed Menara LGB and The Greens in Taman Tun Dr Ismail, Saujana Greens in Puchong and Bellworth Melaka, and one development overseas: Lancer Square in West Kensington, London.

According to a Bursa Malaysia filing last week, BAT's wholly-owned subsidiary Tobacco Importers and Manufacturers Sdn Bhd (TIM) had disposed of its factories and two parcels of leasehold land measuring 5.3ha for RM218 million cash to LGB Properties via a public tender exercise that was closed on 29 April.

The two industrial lots at Jalan Universiti, measuring a combined 53,023.5 sq m (13.10 acres), have 99-year leases expiring in September 2060 and April 2062. The eight buildings on these lots include a four-storey office, two four-storey office and warehouses, a two-storey office, a two-storey warehouse with basement, two one-storey factories with a mezzanine floor, and a one-storey factory.

The disposal came after BAT announced on 17 March that it would be shutting down its manufacturing operations in Petaling Jaya in stages, as it restructured its business operations in Malaysia owing to an increasingly challenging business environment.

To most locals, the factory has been one of the oldest factory in Petaling Jaya. In recent years, however, it was said that the high excise duties imposed on tobacco products have led to the sharp rise in illegal cigarettes and lower legal sales volume.

BAT said that its factory closure will affect 230 employees. The restructuring is targeted to be completed by the second half of 2017.

Based on the purchase price, BAT is expecting a net gain of about RM148.78 million or 52.1 sen per share after taking into consideration the audited net book value of the property, the estimated expenses to be incurred for the proposed disposal, and the real property gains tax.

The price tag, however, is below the market value of RM262.5 million for the assets, as appraised by DTZ Nawawi Tie Leung Property Consultants Sdn Bhd on 22 April. BAT said the market value of the land parcels is RM216.8 million, whereas the market value of the buildings is RM45.7 million.

Still, the proceeds are poised to boost the cigarette producer’s cash and bank balances up to RM256.47 million, from its current cash pile of RM38.47 million as at 31 March.

The property was previously acquired by TIM on 25 November 1996 at RM62.39 million from BAT, which was then known as Rothmans of Pall Mall (M) Bhd.

Apart from the sales and purchase agreement (SPA) of the land, both companies also executed a tenancy agreement for BAT to rent these properties for 12 months for a monthly rental of RM1.09 million, with an option to extend for two further terms of six months each, from the completion of the SPA.

In 2011, the Rothmans roundabout, which is located just outside the factory and had been known for its notorious peak hour congestion, was replaced with a RM5.5 million traffic light junction. The roundabout was named after one of BAT’s cigarette brands, Rothmans.